Lehman Brothers: Will the Share Issue Fail?

Earlier this week, Lehman Brothers (LEH) announced plans for its restructuring, which includes issuing 143 million shares of common stock at $28.00 to raise $4 billion, along with the raising of $2 billion of preference shares.

Now, the obvious question is: “Who will buy these shares at $28.00, when they are currently trading at $ 26.30?”

Who would be stupid enough to incur a 6% loss immediately on what is effectively a risky investment?

If an organization wishes to raise capital, and is perceived as “risky” surely a large discount is appropriate to entice buyers?

It amazes me that the CFO of Lehman can issue statements that are allegedly “economical with the truth” in order to prop up its share price, but now the company faces the issues of trust, as to whether the information that they are disseminating is true or not.

With all of these elements against the issue, I believe that the offer price should be below $20.00, which will have a further dilutive effect against the current shareholders.

I, however, would not take up this offer at any price until more transparency in their accounts are forthcoming and the senior executives are replaced with people who’s statements are based on the company accounts, and not on what they wish they were.

Disclosure: none
 

Comments

[brooooo:]

so what happened to the KSK investment which Leh marked up so much for the last quarter? did it get marked down this quarter? what about other investments which got marked up previously to make the income look better?

2008 Jun 12 04:45 AM